Goldman Sachs trades one large retailer for another.
On Tuesday, the company added Walmart to its shopping list, indicating improved profitability and an increased share of the US grocery market.
At the same time, analysts removed Target from this list. The company remains optimistic about the stock, but expects slower growth from the company next year in line with its historical norms.
According to Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors, Goldman made the right choice.
“Lido Advisors has made a similar deal,” Sanchez told CNBC’s Trading Nation on Tuesday. “We owned Target, now we own Walmart, and one of the reasons is actually similar to Goldman Sachs’s explanation.”
Like Goldman, Sanchez says Walmart’s investment in the e-commerce space and its strengths in the grocery are two reasons to be optimistic about Walmart. This one-two hit – an increased e-commerce presence and the need for brick-and-mortar stores to shop for groceries – is “important to Walmart’s future,” she said.
Inside Edge Capital Management founder Todd Gordon is more cautious, at least until Walmart’s tech tweak improves. Walmart lags behind Target and the broader market in 2021.
“Since last August, when the two companies went their separate ways; they tracked each other, the target has grown by 64%. [and] Walmart is up just 9% from the S&P’s 30%. So it’s kind of a challenge, ”Gordon said during the same interview.
The fundamentals for Walmart look solid, Gordon adds, as e-commerce investments may already be poised to pay off. He says that it may make sense for investors to put a partial position on the basis of fundamental strength and add to it once the technical performance strengthens.
“If we get past $ 155, you can see a breakout of the trendline resistance, which happened in early 2019,” Gordon said.
The stock needs to add 7% to reach this level. Walmart closed just below $ 145 on Tuesday.
Disclosure: Lido Advisors owns shares in Walmart.
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